Monthly Archives: October 2010

Before the court was plaintiffs’ motion for a protective order barring defendants from obtaining their income tax returns. Reasoning that the defendants failed to show a compelling need for same to overcome the plaintiffs’ privacy rights, the court granted the plaintiffs’ motion.

Framing the issue, the court explained:

“Defendants have served a discovery demand seeking production of federal and state income tax returns for various time periods for each plaintiff. Plaintiffs seek a protective order arguing that the tax returns are not relevant and that the requests are improper attempts to ascertain the immigration status of each plaintiff. Defendants respond that they are uninterested in the immigration question, but seek the information to determine the identity of plaintiffs’ employers.”

As the party seeking discovery in this case, the defendants first bear the burden of showing the relevance of the tax returns to the instant action. Defendants argue that the tax returns are relevant since they will identify other employers of the plaintiffs. As defendants apparently claim that they never employed these plaintiffs, they further argue that the tax returns are “relevant as to how much the plaintiffs were paid by these defendants, if they were paid by these defendants at all.” Defs.’ ltr at 1. Plaintiffs respond that the tax returns are irrelevant because even if they reflect the existence of other employers, the returns would not indicate how many hours plaintiffs worked for a particular employer.

Even assuming, arguendo, that the tax returns are relevant, defendants must also establish the second prong of the test-that they have a compelling need for these items because the information is not readily obtainable from a less intrusive source. Sadofsky, 252 F.R.D. at 150 (citations omitted). Defendants offer only a conclusory statement that “there is no other means by which the defendants in this case can establish that someone other than themselves were the plaintiffs’ employer” and a rhetorical question posed to plaintiff’s counsel as to what less intrusive methods might exist. Defendants have singularly failed to establish that the information sought cannot be obtained from a less intrusive source and thus have not met their burden.

As to defendants’ argument regarding the amounts paid by them to the plaintiffs, their own records should reflect this information. Interrogatories, demands for non-tax return documents, and/or inquiries during depositions are discovery devices that apparently have not yet been utilized by defendants. The same devices can be used to obtain discovery regarding any other entities that may have employed the plaintiffs during the relevant time periods. Defendants could, for example, pose interrogatories to determine plaintiffs’ employment history during the relevant time period or question plaintiffs during depositions concerning the number of hours they worked. Carmody, 2007 WL 2042807, at *3 (citing Sabetelli v. Allied Interstate, Inc., 2006 WL 2620385, at *1 (E.D.N.Y. Sept. 13 2006)). Here, there is no representation from defendants that they have attempted to retrieve the information sought from plaintiff’s through discovery of other documentary evidence such as financial records, or “through the use of any other, less intrusive, discovery device.” Carmody, 2007 WL 2042807, at *3.

For the foregoing reasons, plaintiffs’ motion for a protective order is granted. This ruling may be re-visited upon motion by the defendants, provided they can demonstrate that they have unsuccessfully attempted to obtain the information by other methods.”

The Pittsburgh Post-Gazette reports that a new law defining who is an employee (versue independent contractor) is being greated enthusiastically by Pennsylvania workers:

“Union laborers are claiming victory now that Gov. Ed Rendell has signed a law aimed at curtailing construction companies’ ability to skirt taxes — and cut its own costs and liability — by labeling its workers independent contractors.

By classifying their workers as “independent contractors” instead of employees, companies can avoid paying unemployment compensation and workers’ compensation taxes.

Avoiding those taxes, according to labor groups, reduces employer costs and allows such companies to underbid contracting companies that are following the letter of the law.

The new law — formerly House Bill 400 and now Act 72 — is called the Construction Workplace Misclassification Act. Contracting companies that violate the act could be subject to fines and criminal prosecution. There’s also an “acting in concert” provision, which would penalize anyone who knowingly hires a contractor that is in violation of the act.

“It really will start to separate responsible contractors from irresponsible contractors,” said Jason Fincke, executive director of the Builders Guild of Western Pennsylvania, a labor management and contractor association group.

The point of the law isn’t to eliminate the use of independent contractors in the construction industry, he said.

“If there’s a service that you need that you don’t normally provide, you would get someone to do that for you,” Mr. Fincke said. “That’s a legitimate independent contractor.”

The law applies to the construction field only, to the regret of the Teamsters, who had hoped the law would be expanded to include truck drivers (and other kinds of workers) as well. The Teamsters have been fighting with Moon-based FedEx Ground, which classifies its drivers independent contractors. FedEx says its drivers are “small business owners” because they own their own equipment.”

This case was before the court on the plaintiff’s motion for conditional certification. The defendant opposed the motion on several grounds. As discussed here, the court rejected the defendant’s arguments that conditional certification was inappropriate because: (1) the case and proposed class were largely duplicative of another case that had previously been certified, and (2) the plaintiffs had waited too long to move for conditional certification.

Rejecting the defendant’s argument that the case was not appropriate for certification, due to another almost identical case, that had previously been certified, the court stated:

“A class action filed in the District of Connecticut makes nearly identical allegations against Defendant as the instant case. Store managers who worked for Defendant between March 14, 2005, and October 22, 2008 received notice of the Connecticut litigation and were invited to join the class action. Plaintiffs argue that the Court should order that notice of the present litigation be issued to all store managers employed by Defendant since February 22, 2007, including those who received notice of the Connecticut litigation. Plaintiffs assert that the store managers who were given notice of the Connecticut litigation and those who joined that litigation should be given the opportunity to join the instant litigation to ensure that they are properly compensated for the overtime hours they may have worked since the Connecticut litigation’s notice period. Plaintiffs further assert that choosing not to join one § 216(b) action should not preclude a person from joining another action.

Defendant, on the other hand, argues that the Court should limit notice to (1) deli managers and (2) store managers who were not noticed in Connecticut case. Defendant states that this is fair because one of the goals of § 216(b) is to avoid “a multiplicity of duplicative suits….” Hoffmann, 493 U.S. at 172. Defendant also asserts that it is not asking the Court to limit or prohibit a second FLSA class action that has the same pool of plaintiffs. Instead, Defendant asks the Court to put the burden on Plaintiffs to show that the rights of the potential class members who received notice but did not join the Connecticut litigation will be prejudiced if they are not given a second opportunity to opt-in.Defendant argues that Plaintiffs cannot satisfy this burden because there is no evidence that the store managers who received notice of the Connecticut case and declined to join would be prejudiced if they did not receive a second notice. Defendant also asserts that the forty-eight store managers who are already plaintiffs in the Connecticut case should not be re-noticed because they chose to join the Connecticut litigation and that decision should not be disturbed.

Defendant has imposed upon Plaintiffs a burden where none exists. Furthermore, Defendant acknowledges that there is no authority that limits the right of potential plaintiffs to receive notice of § 216(b) lawsuits. As such, the Court will not impose this burden on Plaintiffs. To the extent Defendant believes potential class members should not be permitted, Defendant may raise those arguments at the second stage of the process.”

Rejecting the defendant’s argument regarding the timeliness of plaintiff’s motion, the court stated:

“Defendant argues that Plaintiffs unreasonably delayed in bringing the instant Motion in an attempt to obtain a four or five month delay in the trial of this matter. Defendants note that Plaintiffs waited nearly six months after filing the Complaint to request Court-supervised notice pursuant to § 216(b) of the FLSA. Because Plaintiffs’ requested notice period would expire after the November 22, 2010 trial date in this matter, Defendants argue that Plaintiffs’ request is untimely and should be denied. Plaintiffs assert that Defendant has made no argument that it has been prejudiced by Plaintiffs’ delay in bringing the Motion and that continuing the trial date should not present an issue because “[t]he judicial system benefits by efficient resolution in one proceeding of common issues of law and fact arising from the same alleged discriminatory activity.” Hoffman, 493 U.S. at 170.

Because Defendant has not shown that it has suffered prejudice due to the timing of Plaintiffs’ Motion, the Court finds that the Motion is not untimely.”

This case was before the court on Plaintiff’s motion to dismiss the Defendant’s counterclaim, which sought a declaratory judgment that Plaintiff was exempt from the FLSA’s overtime provisions. Because the Plaintiff had made an identical claim for declaratory judgment that the Defendant had misclassified him as exempt, the court dismissed the counterclaim.

Discussing the duplicative counterclaim, the court reasoned:

“In his complaint, Richmond alleged four legal claims, including a violation of the Fair Labor Standards Act (“FLSA”) based upon Defendants’ alleged failure to pay Richmond, a nonexempt employee, wages and overtime for all hours worked before his employment was terminated. (Docket No. 1, Complaint ¶¶ 21, 35-40 (Count I).) Among various forms of relief, Richmond requested a declaratory judgment that the practices he complains about are unlawful. (Id. at 9.) In the answer, Defendants denied the FLSA allegations and raised as an affirmative defense that the FLSA does not apply because Richmond was an “outside salesman” pursuant to 29 U.S.C. § 213 and thus, an exempt employee who was not covered by the FLSA. In addition, Defendants filed a counterclaim seeking a declaratory judgment that Richmond was an exempt employee. (Docket No. 9, Answer at 6-7, 10-11.)

Richmond now seeks dismissal of the counterclaim under Federal Rule of Civil Procedure 12(b)(6) on the ground that the counterclaim is a mirror image of his own claim and Defendants do not allege factual or legal issues different from those raised in the complaint. Defendants emphasize that they carry the burden to prove that Richmond was an exempt employee, and that their counterclaim could have been brought as a separate declaratory judgment action. Additionally, they believe their declaratory judgment request is proper because a ruling could impact the way Centurion classifies current and future employees under the FLSA or a ruling may have ramifications on enforcement actions of the federal government with respect to Richmond’s claim. Defendants also want to assure their ability to obtain a declaratory judgment that Richmond was an exempt employee even if Richmond decides to dismiss his lawsuit voluntarily.

The Sixth Circuit apparently has not addressed this issue outside the patent context. In Dominion Elec. Mfg. Co. v. Edwin Wiegand Co., 126 F.2d 172, 173-74 (6th Cir.1942), the court held that a counterclaim in a patent infringement suit should not have been dismissed prior to trial, but in so holding the court recognized the unique situation often presented in patent cases where defendants seek declaratory judgments on issues beyond the scope of the complaint. In other types of cases, district courts “have disagreed on the proper treatment of so-called ‘mirror-image’ counterclaims.” Erickson v. Brock & Scott, PLLC, 2009 WL 4884424 at *3 (W.D.Tenn. Dec.8, 2009). Some district courts have dismissed counterclaims because they are redundant to the complaint, while other courts have not. Id. (and cases cited therein).

A district court in Ohio found that these “cases are not necessarily at odds.” Pettrey v. Enterprise Title Agency, Inc., 2006 WL 3342633 at * 3 (N.D.Ohio Nov.17, 2006). Relying on 6 Wright, Miller & Kane, FEDERAL PRACTICE & PROCEDURE 2D § 1406, the Pettrey court determined the focus should be on whether the counterclaim serves any useful purpose. Id. If it cannot be determined early in the litigation if the counterclaim is identical to the complaint, “ ‘the safer course for the court to follow is to deny a request to dismiss a counterclaim for declaratory relief unless there is no doubt that it will be rendered moot by the adjudication of the main action.’ ” Id. (quoting 6 Wright, Miller & Kane, FEDERAL PRACTICE & PROCEDURE 2D § 1406). On the other hand, the court should dismiss a redundant counterclaim when it is clear that there is complete identity of factual and legal issues between the complaint and the counterclaim. Id. (citing Aldens, Inc. v. Packel, 524 F.2d 38, 51-52 (3d Cir.1975)). In Pettrey the district court “harbor[ed] no doubt whatsoever that Defendants’ declaratory judgment counterclaims will be rendered moot by the adjudication of Plaintiffs’ claims [,]” and dismissed the counterclaims, distinguishing the case from the patent infringement context in Dominion. Id.

This case involved an action under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq., for unpaid minimum wages and unpaid overtime wages. The case was before the court on defendants motion for summary judgment and for judicial approval of a settlement allegedly reached by the parties. The plaintiff opposed the defendants’ motion on the basis that he had withdrawn support for the settlement because the sum certain agreed to by the parties was based on faulty calculations by the plaintiff. Plaintiff asserted that he had mistakenly calculated that he was owed $1,415.82 in unpaid minimum wages, rather than $14,170. This miscalculation also affected the amount the plaintiff claimed in liquidated damages, since employees are entitled to liquidated damages (in addition to back wages) equal to the amount of unpaid wages. 29 U.S.C. § 216(b).

Denying the defendants’ motion, the court reasoned:

” ‘There are only two ways in which back wage claims arising under the FLSA can be settled or compromised by employees. First, under [29 U.S.C. § 216(c) ], the Secretary of Labor is authorized to supervise payment to employees of unpaid wages owed to them. Second [sic] when employees bring a private action for back wages under the FLSA, and present to the district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.’ Manning v. New York Univ., 2001 WL 963982 (S.D.N.Y. Aug. 22, 2001). Even assuming that the agreement defendant presses the Court to approve remains valid, the Court is not satisfied that it is fair. Under the agreement, the plaintiff would receive approximately $28,000 less than the amount he claims he is owed not for strategic reasons, but rather because plaintiff’s counsel made an arithmetical error. Cf. Elliot v. Allstate Investigations, Inc., 2008 WL 728648, at *2 (S.D.N.Y. Mar. 19, 2008) (approving settlement of less than half the amount plaintiff claims he was owed under the FLSA when the plaintiff could not support his claims through documentary evidence and the defendant could not pay more than the amount agreed to).

This case was before the court on Plaintiff’s Motion for Reconsideration of the court’s prior decision granting Defendant’s Motion for Summary Judgment. The court had previously held that the Plaintiff’s, pharmaceutical representatives were exempt from the overtime provisions of the Fair Labor Standards Act (FLSA) under both the administrative and outside sales exemptions. Plaintiff sought reconsideration in light of the United States Secretary of Labor’s amicus curiae brief filed in In re Novartis Wage and Hour Litigation. Granting the Plaintiff’s Motion, the court reversed itself, finding that the Second Circuit’s recent opinion was more persuasive than the contrary jurisprudence.

Discussing the exemption issues, the court reasoned:

“In its previous order, this Court determined that Harris could not bring a FLSA claim because her position as a Medical Sales Consultant (“MSC”), or pharmaceutical representative, took her out of FLSA’s purview. This Court found that the MSC position was exempt from FLSA under the “administrative” and “outside sales” exemptions.

Shortly after this Court’s order came out, the Department of Labor (“DOL”) filed an amicus curiae brief in a case then pending before the Second Circuit, In re Novartis Wage & Hour Litigation, 611 F.3d 141 (2010). In Novartis, The DOL argued that, under its regulations, pharmaceutical representatives “do not meet the requirements for either the outside sales or administrative exemption.” (Br. for the Secretary of Labor as Amicus Curiae in Supp. of Pls.-Appellants, Doc. No. 106-2, at 5.) Regarding the outside sales exemption, the DOL noted that, “[b]ecause the [pharmaceutical representatives] do not sell any drugs or obtain any orders for drugs, and can at most obtain from the physicians a non-binding commitment to prescribe NPC’s drugs to their patients when appropriate, [they] do not meet the regulation’s plain and unmistakable requirement that their primary duty must be ‘making sales.’ “ (Id. at 10.) Under the administrative exemption, the DOL noted that, although pharmaceutical representatives work independently, that “does not suffice to qualify for the administrative exemption; [the representatives] do not perform any primary duties that are largely comparable to those found in 29 C.F.R. § 541.202(b), such as formulating or implementing management policies, utilizing authority to deviate from established policies, providing expert advice, or planning business objectives.” (Doc. No. 106-2, at 21.)

While this motion for reconsideration was pending at this Court, the Second Circuit concluded that under the DOL’s regulations, pharmaceutical representatives are not outside salesmen or administrative employees for the purposes of FLSA’s overtime pay requirements. Novartis, 611 F.3d at 149. The Novartis court determined that the DOL’s interpretations were “entitled to ‘controlling’ deference,” id., under the Supreme Court’s decision in Auer v. Robbins, 519 U.S. 452, 461 (1997).

After a review of the applicable authority, this Court adopts the reasoning of the Second Circuit and holds that Plaintiffs are not outside salesmen or administrative employees under FLSA. This Court recognizes that district courts are split on the issue, and that some courts have specifically rejected the DOL’s reasoning as set forth in its Novartis amicus brief. See, e.g., Christopher v. SmithKlein Beecham Corp., 2010 WL 396300, at *1-2 (D.Ariz. Feb. 1, 2010). In this Court’s opinion, however, the Novartis court sets forth a persuasive and reasoned analysis for its deference to the DOL’s interpretation of its regulations. As the Novartis court pointed out, the DOL’s interpretations “do far more than merely parrot the language of the FLSA,” and are therefore “entitled to ‘controlling’ deference unless those interpretations are ‘plainly erroneous or inconsistent with the regulation.’ “ 611 F.3d at 153 (quoting Auer v. Robbins, 519 U.S. 452, 461 (1997)). This Court further agrees that no such error or inconsistency exists. Id.

EDITOR’S NOTE: There continues to be a split of authority with respect to whether pharmaceutical representatives are exempt or nonexempt under the FLSA. Within the last week, another court, analyzing the very same issue–whether reconsideration (of an order granting defendant summary judgment) in light of the Novartis ruling and the DOL’s amicus brief(s) was warranted–another court held that the decision was not due to be reconsidered and allowed its prior decision to stand. Schaefer-Larose v. Eli Lilly and Co., 2010 WL 3892464, at *1 (S.D. Ind. Sept. 29, 2010).

A proposed rule that seeks to improve the H-2B temporary nonagricultural worker program and better protect American workers has just been promulgated. “The proposed rule, to be published in the Federal Register tomorrow, addresses the calculations used to set wage rates for H-2B workers.

The H-2B program allows the entry of foreign workers into the U.S. when qualified American workers are not available and when the employment of foreign workers will not adversely affect the wages and working conditions of similarly employed American workers. The H-2B program is limited by law to a program cap of 66,000 visas per year…

The previous administration promulgated H-2B regulations and did not seek comment in the rulemaking process on the data used to set wage rates. Since the 2008 final rule took effect, however, the department has grown increasingly concerned that the current calculation method does not adequately reflect the appropriate wages necessary to ensure American workers are not adversely affected by the employment of H-2B workers. On Aug. 30, the U.S. District Court for the Eastern District of Pennsylvania ruled that the regulations issued by the department in 2008 had violated the Administrative Procedure Act. The court ordered the department to promulgate new rules that are in compliance with the APA concerning the calculation of the prevailing wage rate in the H-2B program no later than 120 days from the date of the order. Today’s announcement begins the process of complying with the order and with achieving the department’s goal of fully protecting the job opportunities and wages of American workers. The department anticipates a future rulemaking that will address other aspects of the H-2B program.

The proposed regulation would require employers to pay H-2B and American workers recruited in connection with an H-2B job application a wage that meets or exceeds the highest of: the prevailing wage, the federal minimum wage, the state minimum wage or the local minimum wage.

Under the proposed rule, the prevailing wage would be based on the highest of the following:

Wages established under an agreed-upon collective bargaining agreement.

A wage rate established under the Davis-Bacon Act or the Service Contract Act for that occupation in the area of intended employment.

The arithmetic mean wage rate established by the Occupational Employment Statistics wage survey for
that occupation in the area of intended employment.

The proposed rule eliminates the use of private wage surveys, as well as the current four-tier wage structure that differentiates wage rates by the theoretical level of experience, education and supervision required to perform the job, a system that is not relevant to the unskilled positions generally involved in the H-2B program.

Interested persons are invited to submit comments on this proposed rule via the federal e-rulemaking portal at http://www.regulations.gov.”

The U.S. Department of Labor released a report today that raises serious concerns regarding the effective enforcement of labor laws in Honduras under the labor chapter of the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). The report provides recommendations to address the concerns and calls for the contact points establishe […]

The U.S. Department of Labor's Bureau of International Labor Affairs today announced the award of a $7 million cooperative agreement to World Vision to implement a project to combat exploitative child labor and improve labor rights and working conditions in Honduras. World Vision is “dedicated to working with children, families, and their communities wo […]